15

According to Wikipedia

The number of Bitcoins created per block is never more than 50 BTC, and the awards are programmed to decrease over time towards zero, such that no more than 21 million will ever exist.

from which I naively conclude that as time passes less and less bitcoins will be mined and the total amount of bitcoins is limited, so after say ten (or whatever actual number - doesn't matter) years mining a bitcoin will be as unlikely as winning big in a lottery and maybe even news will report that one more bitcoin has been mined.

Are those right conclusions? What exactly happens once mining speed gets close to zero?

13

I think you are confusing two things here:

  • Block generation rate
  • New bitcoins introduced per block

Blocks will always be found at a rate of approximately one per 10 minute. The difficulty of finding a block adjusts itself according to how many people are trying. Simply said, if N people are mining (all with equal hashing power), they will each (on average) find one block per N*10 minutes.

On the other hand, the newly introduced currency in each block is currently 50 BTC/blocks, but somewhere end 2012 this will decrease to 25 BTC. 4 years later, it will become 12.5, and so on. Around 130 years from now, the last block with non-zero new coins will be created. After that, mining will still continue, but blocks will only have transaction fees as rewards, and no new currency anymore.

2

Mining speed will not get close to zero if bitcoin remains on the road of success, because transaction fees will provide enough incentive to mine, even when the block reward (currently 50 BTC) is close to 0 (it halves roughly every 4 years).

To give you an idea what this could look like, let me estimate some numbers: In the year 2026, there might be around 500,000 transactions per block. Even one Satoshi (0.00000001 BTC) fee per transaction would easily suffice to support quite a secure mining network, because that would add up to 0.006 BTC fees and if bitcoin does 500,000 tx per block (that's about the number of transaction VISA does nowadays), 1 BTC would be valued maybe something like 100,000 USD, so those fees would be equivalent to USD 600, roughly the same as the 50 BTC incentive of today. Voilá.

At least that's the idea. Wether or not it will work, remains to be seen.

There is a possibility of network hashing speed going close to zero: that can happen if bitcoin is being abandoned. Then we'll face the problem namecoin is currently facing: The next difficulty retarget takes a very long time to reach (namecoins next difficulty retarget will be around christmas) and transaction speed will be excrutiatingly slow. A possible solution in such a case would be to change the difficulty retarget rules, maybe along the lines of what SolidCoin is doing (more often, allow greater change).

1

Your question assumes that the mining speed will get close to zero. Which I guess will be true in some time span. I often see people saying that Bitcoin allows transfers without fees. While this is true today, it is not a guaranteed thing. In order to get included in a block, the transactions bid to get included. It just so happens that with the new bitcoin reward per block most miners will accept a zero fee transaction. That is expected to change as the reward per block lowers, and if the network gets enough use and fees that is expected to be the incentive to keep miners mining.

The answer to your question though, is as the mining rate lowers the security of the network drops, and the closer it gets to zero, the more likely someone can play havoc with it. It is also likely that if it drops close to zero bitcoins no longer matter anyway.

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